Logistics Indicator Q2 2023 - “Business is 50 percent psychology” Extras

Commentary by Prof. Dr.-Ing. Thomas Wimmer, Chairman of the Board of BVL – The Supply Chain Network

The interplay of expectations, perceptions and experiences

At first glance, the current trend could easily be summarised as “everything seems to be getting worse”. The only good news are the slightly more positive business expectations among the logistics providers, but these expectations are already in a clearly contractive corridor. The scores for the respondents in industry and trade when asked about the current business situation are on a clear downtrend, as are the expectations for the next six months.

Expectations are shaped by perceptions and experiences. These factors are relative and are also influenced by psychological effects. As Ludwig Erhard once said, “business is 50 percent psychology”. So it’s worth taking a closer look at what’s happening.

BVL members in trade and the consumer goods industry report a shortage of resources and increased prices for these resources. Energy prices have risen by a far greater degree as a result of the Ukraine crisis than was the case following the Lehman crisis in 2009, the Fukushima incident in 2011 and the Covid19 crisis of 2020/21. Markets are turbulent, customer behaviour has changed, and the focus is now on ambitious climate targets.

Port managers report a major increase in “blank sailings”, in other words cancellations of ship departures in order to reduce loading capacity. There were already more blank sailings in one month at the beginning of 2023 than during the whole of 2022. High volumes of goods are being stored in Germany’s warehouses, in particular seasonal goods, but there are also many other categories of goods where transshipment levels are extremely low. eCommerce business is significantly cooler. Stocking levels are being reduced, because the focus of financial controlling activities is once again on “working capital”. There is noticeable consumer restraint due to the high inflation. Even “evergreens” like sanitary ware and interior fixtures are currently saturated, and there is significant price pressure in the market.

Is it therefore surprising that expectations for the economic trend are pessimistic? Possibly not, but there are also opposing views. Despite the temporary shocks in the value added chains, consumption has nevertheless been quite robust in recent months. Although the combination of interest rate turnaround and inflation has led to reduced consumption, we can expect to see more stable volumes at a lower level. It’s also worth mentioning that logistics properties are being used to full capacity, with only 1.5% of existing space being available.

The automotive sector has stabilised, albeit at a lower level than in 2018/19. Pent-up demand and the intelligent use of scarce resources for high-margin products are having a beneficial effect. We can see a positive trend in batteries and parts/components. In addition, the prices for air and sea freight have fallen, despite inland shipping profiting from the boom in coal transports.

In short, therefore, there is – once again – little reason for doom and gloom. Probably the best advice is to do what has often worked before: remain alert, take it slowly, exploit niches and enter into dialogue with other affected parties and the stakeholders in the business sector.

We should also disengage from ideological debate here in Germany. Regardless of whether we like the country’s current government or not, international competition waits for no one. Many of the innovations that are being discussed in Germany are already the standard in Asia. Technology push is unstoppable, and the arising opportunities must be exploited. No single company can expand the infrastructure on its own. Providers, companies, associations and the government all need to work together. BVL and its members will be part of this endeavour.